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The previous Chairman of the Securities and Exchange Commission, Jay Clayton, did not have the best connection with the crypto-community. While he was never particularly popular, his final move in government — the SEC prosecuting Ripple and its leaders with improper securities offers — sunk his popularity.
Needless to say, the reaction from the community was strong and venomous, with many, including defendant Garlinghouse, citing the aforementioned litigation to indicate that the United States and the SEC were anti-tech and anti-innovation. Surprisingly, though the price of XRP plummeted immediately after the news surfaced, both XRP and Ripple rebounded as a result of tiny legal victories and the “us v. them” narrative gaining traction.
As a result, many feel the SEC now has egg on its face, with a recent Forbes story claiming that the SEC, rather than Ripple, is on trial right now.
Clayton isn’t SEC Chair anymore, “crypto-friendly” Gary Gensler is. However, the former’s last act as Chair has new meaning with every new deposition and every new motion in the ongoing case.
Ergo, it was in this context of these developments that Jay Clayton’s latest Op-ed for Wall Street Journal came out of the blue.
Now, Clayton touched upon quite a few points here, including the logistics of the U.S introducing the Digital Dollar and cryptocurrencies being the “preferred method” for hackers (Clearly, Clayton isn’t aware of January’s Chainalysis crypto-crime report which found that while ransomware attacks rose significantly over the last year, illicit activities made up just 0.34% of all cryptocurrency transaction volume – Down from 2% the previous year).
What grabbed the most attention, however, was Clayton’s assertion – “Innovation is welcome absent some legal reason to oppose it.” What’s more, the former Chair of the SEC also conceded to the need for regulatory clarity and efficiency, while also touching upon the need for a proactive and coordinated approach to ensure the “leadership role” of the U.S financial market.
Examine the aforementioned issues carefully now. These aren’t just arguments in an op-ed. They are talking points, and each one is strikingly similar to what Ripple, its CEOs, and other industry insiders said last year. In common parlance, Clayton appeared to do a U-turn, with Chair’s ex-opinions now presumably matching with the bulk of the crypto-community.
What, though, might have caused such a reversal? One can only conjecture, after all. Clayton’s current position as an advisor to One River Asset Management might have played a factor.
A simpler explanation is that Clayton has realised which way the wind is blowing. As previously indicated, the SEC, not the San Francisco-based blockchain company, has lately gone on trial. Judge Netburn had to compel the SEC to turn over internal Bitcoin, Ethereum, and XRP communication twice, only to have the agency request yet another postponement.
Clayton has now been “cornered,” as many members of the community put it.
Many people, including Ripple’s Brad Garlinghouse, weighed in, calling the aforementioned Op-ed and related conclusions “ironic.” While the CEO remarked that being late is preferable to never, he swiftly added
“Cryptos, like nearly any new innovative technology, can be used for good or bad purposes. The problem is that US companies seeking to be compliant and use this tech for good are left in limbo (or for Ripple, worse!) because of a lack of a clear, predictable framework.”
Mary Jo-White, Clayton’s predecessor as SEC Chair, is already on Ripple’s side. Clayton seemed to be side with the defendants’ talking points for the time being. But what does this mean? Well, most likely not much.
What it will do, though, is reignite discussion of a settlement. Unfortunately, when it could be is a topic for another time.